Channel Conversions | #AUDUSD #AUD #USD #Forex

We just reviewed and made a case for a AUDUSD pullback. Price did meet the upper channel in the larger timeframe, but as we continue to fine tune the trade, we decided to look at what is going on at the "microscopic" level of the M5 world.

What we saw was a protracted consolidation period at the level where we called for a potential reversal as we looked at a new pattern, called "Kiss of Death, or KOD - Here is where the initial analysis can be found:

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Looking at details of the consolidation, you might at first notice a random up and down bopping of price action . Yet, if you remain still and start looking for correspondence, you might start seeing measured moves, consistent price action over time, and perhaps lines. Using the "clone" feature of TradingView tools, you would possibly be able to decipher a bit more, such as tops and bottoms along these innocuous parallels, some of which are rising, while others falling ... Look mainly for smooth, low pitch lines that have more relevance and authority over time in their relation with price and one another.

I have left in the chart the rationale supporting the overall bearish expectation. There is no definitive outcome as of this writing, but I thought that this might offer the junior trader some insight into an alternate use of channels, as they seem to have a mind of their own, tussling price up and down across their borders, a price action that would other remain incoherent to the eyes.

Cheers,

David Alcindor

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Disclaimer: All of our analyses are for educational purpose only. The forecasts, analyses and opinions generated herein are not trading recommendations.

Yes, following the channels interplay, you will that price has clearly abandoned any of the bearish channels (blue and red), and stepped at the top of its bullish channel to launch a steady climb - David

At this point, a Cypher near 0.8989 or a Shark pattern near 0.90275 are the best possible outcome from which a measured decline could happen. In the case of a Cypher, I would look for price seeking support at the bearish channel upper border, converting it from former overhead resistance to likely new support level - Best is to seek a Fib level to corroborate this, say 38.2, 0.50 or 0.618. In the case of a Shark, it often leads to a 5-0 Pattern, which means that a measured decline of 50% is the probable reactive low. Here too, it is beast to corroborate that reactive decline with a Fib measurement - David

@GohSam - The channel interplay allows the trader to define which channel is in control of price. It also allows the trader to anticipate a range of price action that should remain within the boundaries of the controlling channel - Is this answering your question?
- David